Page 114 - Rich Dad's Increase Your Financial IQ: Get Smarter with Your Money

real estate and my point of view about investing in real estate? Or, Why,
while so many people were panicking, was I excited about buying more

property?
The answers to those questions are provided in this chapter through two
financial concepts: control and leverage.
As stated repeatedly in this book, the rules of money changed after 1971

and 1974. There are new rules, and a new capitalism. In 1974, millions of
workers began losing their paycheck for life, known as a defined benefit
pension. They now had to save and invest for their retirement in defined
contribution pension plans. The problem is most people have very little

financial training or education in order to invest for their retirement
properly. Another problem is the new rules of capitalism require workers to
invest in assets they have no control and no leverage over. During market
crashes, all most can do is watch helplessly as the financial hurricane

whipsaws their wealth and financial security.
The new capitalism puts millions of workers’ money into investments
that allow them very little control or leverage. Because I have control over
my investments, in this example a 300-unit apartment house, I am not as

affected by market crashes. Because I have control, I am confident about
using a lot more leverage. Due to control and leverage, I can achieve
greater wealth, in less time, with very little risk, and minimize the effect of
the booms and busts of markets on my investments.

The Market Has Been Crashing for a Long Time

As I wrote earlier, USA Today did a survey and found that the greatest fear
in America was not terrorism, but the fear of running out of money during
retirement. After August 9 and 10, 2007, I am sure that fear spread a little

further.
The people who are worried have good reason to worry. When you look
at the two charts below, you can see the effect of the rule changes of 1971
and 1974 on the value of the stock market. As you can see, the market has

actually been crashing for a long time.